Here’s What Apple Needs to Fix Its Stock

CLSA Asia Pacific Markets analyst Avi Silver has cut his price target on Apple (NASDAQ:AAPL) stock to $680 from $770 after expressing concerns that the iPhone was losing market share in Asia and Europe. Although Silver said he believed the stock would outperform the broader market this year, not offering a cheaper model of the phone as well as the absence of a larger screen had cost the company.

“The two key reasons (interrelated) it is not gaining share in certain markets are 1) screen size and 2) a much more competitive lineup from competitors after the iPhone launch,” Silver wrote in a research note, according to Barron’s. “Apple’s lack of a near-5 inch screen along with highly competitive offerings from Samsung in the bigger-screen categories are leading to lower market share especially in mature Asia markets where consumers have shown a preference for larger form factors. That’s not to say Apple is not doing well in many of these markets. In fact, its market share is above 50 percent in some of these markets. However, we believe its share has been coming down from elevated levels compared to previous years.”

Silver cited numbers from various markets in Asia, including Hong Kong, Singapore, and Korea, to argue that the year-over-year market share of the iPhone had come down. In some positive news, the upshot was that in the U.S., the sales trend was “favorable” and in China “we believe momentum continues following robust first weekend sales in early December,” he added.

According to the analyst, offering a lower-priced iPhone could add $5 per share to Apple’s profit in fiscal 2014, even if it cannibalized higher-priced models. Silver predicted that the company was planning four new iPhone models this year: an iPhone 5S with a four-inch screen, a model with a larger screen than the iPhone 5, a lower-end iPhone, and a dedicated China Mobile (NYSE:CHL) model.